CMP224 – Cap on the total TNUoS target revenue to be recovered from generation users Place your chosen image here. The four corners must just cover the arrow tips. For covers, the three pictures should be the same size and in a straight line. Workgroup Meeting 3 – 6 th December 2013 Tushar Singh
Agenda Item Lead Introduction & Meeting Objectives PH Safety Moment TS Actions from last meeting All Review draft consultation TS Next Steps PH
Safety Moment – Winter Dehydration Facts � Very Easy to get dehydrated in Winter � Outdoor activities – loss of fluids comparable to summer months � cold dry air, wind chill, inadequate fluid intake, sweating and shivering � Prevention � Cold weather suppresses thirst so remember to drink water � Too much beverage intake can act as diuretic flushing out water from the body � Alcohol increases chances of hypothermia � Monitor the quantity and colour of your urine � Don’t wait till you get thirsty
Actions from previous meeting S.No. Action Owner Deadline Progress 1 Update presentation slide based on the TS Next meeting Included in draft forecast of £/ � exchange rates with the consultation & to be information provided by Cem. Provide a discussed today new graph to include within the consultation. 2 Redo analysis for the Original proposal for TS Next meeting To be discussed the 3b option (limited specific – spurs for today. the sole use of generation)). 3 Consider what assets are included in TS Next Meeting To be discussed option 3b (other than OFTO assets). today. 4 Consider : i) the Calendar year / Financial All Next Meeting year compliance issue, ii) setting on forecast / actual compliance issue (i.e. if forecast is wrong). 5 Confirm whether it is over or under TS Next Meeting To be discussed recovery error that effects performance today. against the regulation and draw up an example to circulate to the Workgroup. 6 Provide outline of the methodology for a TS Next Meeting To be discussed dynamic margin, including a strawman of today it’s operation. 7 Circulate draft Workgroup consultation. TS To be circulated prior Circulated to next meeting
Slow Progression using OBR forecast exchange rates 3.5 3.0 2.5 €/MWh 2.0 1.5 1.0 0.5 0.0 2013/14 2014/15 2015/16 2016/17 2017/18 Generation TNUoS charge Average Annual Generation TNUoS charge EC guideline
Gone Green using OBR forecast exchange rates 3.5 3.0 2.5 €/MWh 2.0 1.5 1.0 0.5 0.0 2013/14 2014/15 2015/16 2016/17 2017/18 Generation TNUoS Charge Average Annual Generation TNUoS charge EC guideline
Applicable Spur Examples � The subset of local circuits solely used for the purpose of connecting generation to the MITS, that do not parallel the MITS. MITS MITS MITS MITS
Applicable Spur Examples (2) MITS MITS MITS MITS
Affect of removing generation only spurs - Slow Progression
Affect of removing generation only spurs - Gone Green
Mechanism Application � Used to assess potential forecast error � Variability possible on each of the element of the average annual transmission charge calculation: � Recovery from generation (linked to over/under recovery) � Exchange Rates (market driven) � Generation Output (largely dependent upon demand) � Inputs adjusted based maximum error observed in 5 years in each to calculate an inflated average annual transmission charge: Inflated Recovery x Inflated Exchange Rate Forecast Deflated Generation Output
Generation Output Forecast Error � Based upon forecast error in annual energy consumption forecasts from SYS/ETYS/Future Energy Scenario publications. � Changes made to basis of data published from 2012/13 following change in basis of forecasts � Move from Transmission System Demand to GB Demand Consumption forecast Forecast Year (y-1) Reported Outturn Error 2007/08 350.6 351.0 -0.1% 2008/09 348.2 337.6 3.1% 2009/10 325.9 325.4 0.1% 2010/11 323.7 314.7 2.9% 2011/12 314.4 312.5 0.6% 2012/13 312.7 Forecast basis changed N/A
Exchange rates � Annual reporting to Ofgem uses an annual average exchange rate. � Sterling amounts are also included in the submission. � Deviation analysis undertaken using average annual BoE � /£ exchange rates. � Deviation of annual rates from 5 year average ( � 1.18) used to determine maximum deviation. Annual Average � /£ Deviation from 5 year Year Exchange Rate average 2008/9 1.20 2.1% 2009/10 1.13 -4.3% 2010/11 1.18 -0.2% 2011/12 1.16 -1.7% 2012/13 1.23 4.1%
Over/Under Recovery � Link between increases to generation charges within year and over recovery (e.g. OFTO appointment timing). � Max deviation calculated based upon observed over/under recovery over past 5 years. Financial Year Over (+ve) / Under(-ve) Recovery (%) 2012-13 0.1% 2011-12 -1.5% 2010-11 0.8% 2009-10 -3.1% 2008-09 1.0%
Application of Mechanism � Applying adjustments to each factor equates to an inflation of 11% in a given year: Inflated Recovery x Inflated Exchange Rate Forecast Deflated Generation Output => (Forecast Recovery x1.031) x (Forecast Exchange Rate x 1.043) Generation Output x 0.969 Forecast Recovery x Forecast Exchange Rate => 1.11 x Generation Output � Equates to setting tariffs capping tariffs set under a best forecast to a limit of � 2.25/MWh
Effect of mechanism 3.50 3.00 2.50 €/MWh 2.00 1.50 1.00 0.50 0.00 2013/14 2014/15 2015/16 2016/17 2017/18 Generation TNUoS Charge Average Annual Generation TNUoS charge Effective Cap
Impact for 2015/16 � Unadjusted (27% recovery): � Contracted generation background of 78.98GW � Assumed generation recovery of £735m � Average recovery of £9.31/kW � Equates to � 2.7/MWh � Adjusted (23.0% recovery): � Assumed generation recovery of £627m � Average recovery of £7.94/kW � Generation residual reduced by £1.37/kW � Demand residual increased by £1.93/kW (assuming 56GW of peak demand) � Best forecast adjusted generation recovery of £675m (24.7% recovery).
Next Steps � Implementation Timescales � Legal Text
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